charleroi
Certified Professional Accountant Mark Turnley presented Charleroi Council with an overview of the 2021 audit, and confirmed what Borough Manager Matt Staniszewski reported last week — that it is very likely Charleroi Borough will not end fiscal year 2022 in the black.
During his report Turnley went over various aspects of 2021 revenues and expenditures of the 2021 general fund, the general fund budget compared to actual results and several other accounts, practices and recommendations.
According to Turnley, the Government Finance Officers Association has recommended that municipalities maintain an “unassigned fund balance” level of approximately two months of general fund expenditures. In Charleroi, on Dec. 31, 2021 the borough’s fund balance was approximately 13% of the GFOA recommended level.
Staniszewski commented that at the borough’s current expenditure rate, 2022 could have an even larger gap.
Last week, Staniszewski said the borough has spent 91.5% of its $2.6 million budget so far this year.
With one quarter left in the fiscal year, it could be difficult to cover monthly expenses through the year’s end if more revenue is not generated.
Because of several unfunded obligations in the 2022 spending plan, when council accepted the budget last December, it created a deficit of at least $478,644. Turnley was focused on 2021 financials, but similar problems created in the 2021 budget trickled into the budget that was passed for 2022, primarily transfers of funds that were not budgeted properly, through line items to specify “transfers in” or “transfers out.” To help keep finances better organized on a month to month basis, Turnley recommended changing the way the borough reviews its profit and loss statements
CHARLEROI • A7 each month.
Currently the monthly reports provided to council are consolidated.
Turnley said it would be ideal to have a separate report of each fund, including the general fund, Liquid Fuels Fund, Act 13 Fund, ARPA Fund, Capital Reserve Fund, Pennvest Fund and street and sewer fund.
“Other than the general fund, each of the other funds was established to account for the restrictions associated with the receipts and disbursements that are part of these separate funds,” Turnley said in his report. “When reviewing the fiscal health of the borough’s general fund, the consolidated format can be very misleading. As an example, the unaudited net income (bottom-line) of the borough, as showing on the final 2021 Profit & Loss Budget versus Actual report was $230,291. However, after separating these ‘restricted’ funds from this total, the general fund reflected a net income of $12,027 for the year. If monies from these other funds are going to be transferred into the general fund to assist with general operations, those ‘transfers into the general fund’ should be budgeted separately as ‘transfers in.'”
Additionally, Turnley said that while it would appear that the borough had a general fund balance of about $290,000 as of Dec. 31, 2021, nearly $244,000 of that money was restricted for certain uses.
Turnley said in 2021, of the borough’s 6.85 millage rate, 1.88 of those mills were dedicated for street lighting, fire department, debt service, pension and the library, meaning that a large portion of the general fund end balance was earmarked for certain projects or departments.
The borough did not designate millage to other purposes aside from general operating costs in 2022.
Additionally, while the 2022 audit will not be reported until late next year, during his review of “subsequent events” that may impact the borough financially, Turnely said he reviewed the profit and loss budget versus actual report in the subsequent year through the latest date available.
“I reviewed this report basically through Aug. 31, 2022 and noted the following expenditures items that appear to be significantly over-budget that may ultimately impact the borough’s available fund balance carried forward into calendar year 2023 and may impact the borough’s decision as to the appropriate real estate tax millage,” he said in his report.
Of those, he pointed out exceeded budgeted items for code enforcement, maintenance of highways and roads, public works supplies, tools and equipments and public works repairs. All of which Staniszewski reported on in his presentation last week, though his numbers more recently provided to council were higher because of others bills that were paid after Aug. 31.
Councilman Larry Celaschi said the report prepared by Turnley through Aug. 31 mirrors what Staniszewski presented.
“I highlighted this and pulled out what he (Staniszewski) presented last week and this mirrors what our borough manager presented on the wall,” Celaschi said and asked how the previous borough council could have adopted a budget that is expected to create such a deficit. Turnley said often times because borough code does not allow for council’s to pass an unbalanced budget, sometimes revenues are inflated and expenditures deflated to create a balanced budget, which appears to be the case for 2022 so far.
“The mark has been missed so significantly and I am not sure why that is,” Turnley said to council.
Council went on to question items that were specifically over budget, including code enforcement and a paving project, but Turnely pointed out that if those things were budgeted for properly, council would have had a better idea of what their bottom line was to approve projects or payments.
“It is looking like you are on trend to finish this year in a deficit unless you have certain revenue items that were not anticipated,” Turnley said.
“I want to stress that this is for last year and is not this year’s budget,” Staniszewski said. “It confirms quite a bit of my findings though in terms of how they have been poorly managed, and not so good of past practices when it comes to managing money and running efficient government.”
A profit/loss report for September shows the fund balance with a net of $36.
Council ratified over $212,000 in general operating bills on Wednesday.
Council briefly discussed, in a contentious manner, who or what projects to blame the projected deficit on or overspending, without much resolution.
Councilman Frank Paterra said the borough has been left with only a handful of options, one of them being Act 47, which Councilwoman Nancy Ellis recommended the borough consider last week.
“We have a few choices,” Paterra said. “We raise the taxes 6 mills, which I am not going to do, you dismantle the whole borough, or three, you sell an asset. None are really exciting, but we are going to have to do something.”
Staniszewski said he has options to present to council at an upcoming budget workshop, set for 5 p.m. Oct. 17, which is open to the public. Council will hold a second budget workshop 5 p.m. Nov. 24 to continue to discuss its finances, budget for 2023 and how to best end the year in the black without placing a burden on taxpayers.
Staniszewski anticipates he will present a preliminary budget to council Nov. 9 with the hope of formally adopting a budget Dec. 14.